Standard & Poor’s has cut SNS Bank’s rating from A- to BBB+ as well as downgrading parent SNS Reaal and other group entities because of a weaker than expected economic outlook in the group’s main markets.

The rating agency said on Thursday that this will result in a slower and weaker recovery in the bank’s risk exposures and earnings, while presenting some downside risk to the group’s insurance operations’ prospects. S&P also believes that SNS’s commitment to repay capital securities received from the Dutch government by the end of 2013 constitutes a more onerous undertaking than it previously anticipated, even if the group has made rapid progress against its capital release programme.

SNS Bank has a ‘bbb’ standalone credit assessment from S&P. It said this is based on an ‘a-’ anchor for commercial banks in the Netherlands, as well as the bank’s “adequate” business position, “adequate” capital and earnings, “weak” risk position, and “average” funding and “adequate” liquidity.

“We consider SNS Bank’s risk position to be weak, primarily reflecting the substantial loan losses caused by the bank’s property finance activities and some concentration in this sector,” said S&P. “While it now accounts for a smaller 14% of total lending, commercial property loans still generated around 70% of impairment charges in 2011.

“Our assessment of the bank’s risk position could improve to ‘moderate’ once loan losses are set to normalize to a level where the bank again starts to generate capital.”

The rating agency said that it classifies SNS Bank as having “moderate” systemic importance in the Netherlands, a country it considers “supportive” of its banking system. However, it noted that a notch of support factored into SNS Bank’s counterparty credit rating is attributable to its status as a “core” subsidiary of the SNS Reaal group.